Green GDP: Notes for UPSC

Green GDP is an important and current topic that is relevant to the UPSC exam. It forms a part of the current affairs, environment and ecology, polity and also social issues segments of the IAS exam. The following article gives you a brief about the concept of green GDP.

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What is the Green GDP?

The Green Gross Domestic Product, or Green GDP for short, is an indicator of economic growth with environmental factors taken into consideration along with the standard GDP of a country. Green GDP factors biodiversity losses and costs attributed to climate change. Physical indicators like “carbon dioxide per year or “waste per capita” may be aggregated to indices like the “Sustainable Development Index”

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What is the Rationale behind Green GDP?

The standard GDP measurement has limitations on account of being indicators of economic growth and desirable standards of living. The standard GDP measures only the total economic output and does not have any means to identify wealthy and assets that arise because of the economic output.

The normal GDP also does not have any way of knowing whether the level of income created in a country will be sustainable or not. To overcome this limitation the green GDP is sought after.

National Capital is poorly described in GDP as they are not considered relevant. With relations to their costs, policymakers and economic planners do not give sufficient importance to benefits that protective environmental projects might give in the future. The positive benefits that may arise out of any forest or agricultural land are not taken into account due to the operational difficulties around measuring and assessing such assets. Also, the impact that depletion of natural resources needed to run the economy is accounted for in standard GDP measurements.

A need for a comprehensive macroeconomic indicator is in tandem with the need for sustainable development. GDP is falsely believed to be an indicator of social well-being and thus it’s used heavily in the analysis of political and economic policy. The Green GDP will be a suitable alternative in this regard.

How is Green GDP Calculated?

Green GDP is calculated by subtracting net natural capital consumption from the standard GDP. This includes resource depletion, environmental degradation and protective environmental initiatives. These calculations can alternatively be applied to the net domestic product (NDP), which subtracts the depreciation of capital from GDP. In every case, it is required to convert any resource extraction activity into a monetary value since they are expressed in this manner through national accounts.

GDP vs Green GDP

Critics of calculations that take into account environmental factors point out that it is difficult to quantify some of their indicated outputs. This is a particular difficulty in cases where the environmental asset does not exist in a traditional market and is therefore non-tradable. Ecosystem services are one example of this type of resource. In the case that valuation is undertaken indirectly, there is a possibility that calculations may rely on speculation or hypothetical assumptions.

Those who support these adjusted aggregates may reply to this objection in one of two ways. First, as our technological capabilities increase, more accurate methods of valuation have been and will continue to develop. Second, that while measurements may not be perfect in the cases of non-market natural assets, the adjustments they entail are still a preferable alternative to traditional GDP.

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